The Financial Supervisory Commission (FSC) yesterday approved a provisional capital requirement measure granting domestic life insurance firms greater flexibility in booking unrealized equities losses.
For this year only, life insurers may measure their unrealized stock losses by taking the average of their stock values from the trading sessions for the past six months, rather than based on closing levels on the final trading day of the year, the commission said.
The global stock market plunge caused by Europe’s debt crisis warrants the temporary arrangement, the commission said.
Ongoing equities corrections significantly eroded the earnings of major financial holding companies as evidenced by their financial statements last month.
Cathay Life Insurance Co (國泰人壽) and Shin Kong Life Insurance Co (新光人壽) incurred more losses than earnings, attributable mainly to shrinking equities portfolios, their previous filings to the Taiwan Stock Exchange showed.
The formula, which may not apply to unrealized gains, will make unrealized losses less steep, easing pressures on some life insurers to raise new funds to meet capital adequacy requirements.
The FSC urged firms with capital increase plans to strengthen their capital structure and enhance risk management amid increasing global uncertainty.